Debt consolidation loans come in two types. The first would be a secured loan. With a secured loan the borrower is asked to place an asset in collateral against the loan amount. This collateral in fact guarantees the amount of the loan. If the loan goes bad. That is, the borrower fails to make payments, then the lending institution can take possession of the collateral to use to clear the loan.

The other type of loan is an unsecured loan. The other type of loan is an unsecured loan. It is made with no collateral to guarantee the loan. That is that the borrower is not asked to put up anything of value to guarantee against default.There are pros and cons for both types of loans for both the borrower and the lender.

A secured loan is lower risk for the lender and can allow them to give a lower interest rate and better terms on the loan. This is because the loan is guaranteed by the value of the collateral. The downside for the borrower is that if they default on the loan they lose the amount of the loan against their collateral. The lender can sell it to repay the loan.

With an unsecured loan the borrower must charge a higher interest rate to compensate for the added risk they are taking because they have no collateral if the loan defaults. The borrower puts no collateral at risk but pays higher interest and has stiffer terms in return. That is both the upside and the downside for both borrower and lender.

A credit counselor can help to explain the finer points of debt consolidation. For people in need of debt relief many times there are options other than making ongoing payments on high interest loans. Credit counselors are experts at debt consolidation and can many times be of great help in educating people on how to find relief from crushing debt obligations

without any negative effect on their credit. What someone in this position does not need is another debt incurred as a result of bad decision making. A prudent long term plan is usually what is needed to be put in place. For this it is well advised that you seek out and procure professional bad credit counselors. Professional credit counselors are available online and the help they can render is well worth the price if you are in need of debt relief.